Back to top

GAP insurance explained

GAP insurance explained

Share this guide:

Last updated: 15 September 2021

Buying a new car is normally an exciting experience but there are always risks involved and working out what sort of insurance or cover you need can be difficult. This is a particular concern with new cars as they often lose value quickly and most insurance policies will only pay out what a car is worth at the time. One solution to this is Guaranteed Asset Protection (GAP) insurance, in this guide we’ll explain what it is, how it works and whether it’s the right policy for you.

What is Guaranteed Asset Protection insurance?

Even with the most comprehensive insurance plan, in the event of your car being written off your insurer will only pay out what the value of your car at the time of the accident and not the price you paid for it. 

This is a problem for new car owners as, according to the AA, a brand new car will lose 60% of its value in its first three years on the road. This means you could be losing that money if you’re involved in a significant accident in the first few years of owning a new vehicle, and makes buying a new car quite risky.

GAP insurance is therefore designed to cover the difference between the amount paid out by your insurer and the amount you paid for the car. It can also cover any outstanding payments you have on the original purchase of the car.

This type of insurance is specifically designed for new cars as older vehicles have a much lower rate of depreciation. 

Is GAP insurance right for me?

Before purchasing GAP insurance, it’s important to think about the following questions:

Did you buy your car on finance?

If you bought your car on a finance deal, you may risk being finding yourself in debt as without GAP insurance, you may owe more than the car is worth at the time of the accident. This can be a further problem if: 

  • You’re paying a lot of interest on your finance deal, particularly if your repaying the money over a longer period. 
  • If you only made a small original down payment, leaving you with a large amount outstanding. 
  • Your deal involves a large payment at the end, known as a ‘balloon payment’.

Are you on a contract hire deal?

If you’ve loaned your car via a long term hire deal and you’re involved in an accident, you may end up owing the hire company more than your insurance company will pay out to you. 

Can you afford to replace your car?

If you’ve recently bought a car that you would be unable to replace due to its depreciation in value.

If any of the above apply to you, then GAP insurance may be right for you as it would leave you in a much better position if you do come to be involved in an accident. 

When is GAP insurance not suitable?

  • First car owner within 12 months of purchase: If you’ve taken out a comprehensive insurance agreement when you purchased the car this will typically include brand new car replacement for the first 12 months of the agreement. However, there are some exclusions which usually apply such as whether the car was stolen, or if the driver was at fault. After this 12 month period has ended you may still want to consider GAP insurance. 
  • Your finance agreement covers you: Some finance deals include clauses which means you will be covered for the difference between the official value of the car and the amount you paid. This isn’t universal and always be sure to check the terms of your agreement. 
  • You can afford to pay the difference: If you can afford to pay the difference between the amounts you paid for the car and the amount the insurer can offer you, GAP insurance may not be required. 

What types of GAP insurance are there?

There are three main types of GAP insurance, all which add to the amount you receive from your insurer to varying degrees:

  • Vehicle replacement cover: Under this policy you will be covered for the difference between your insurer’s payment and the cost of replacing your car with a new car of the same model, make and specifications. This is best if you’re preference option is to replace your car with a new model, it will save you from having to pay extra if your car has become more expensive. 
  • Return to invoice: This cover pays the difference between the maximum cost your insurer pays out and the price you paid for the car. 
  • Return to value: With a return to value agreement you will be covered for the difference between your insurer’s maximum payment and the car’s value when it was new. This is particularly useful if you bought your car second-hand. 


Before signing up to any agreement be sure to read all the terms and conditions as in certain circumstances you may not receive a full pay out. For example, if you have outstanding payments on your insurance or if you are found to have been negligent. 

It’s also important to remember that GAP insurance will only be paid out if: 

  1. Your insurance is comprehensive 
  2. Your car has been ‘written off’
  3. You have successfully made a claim to your insurer.

Where can I find the best GAP insurance deals?

If you’ve decided GAP insurance is right for you, use our car insurance comparison tool to find the best policy for your needs. Simply fill in a few details, we’ll take account of your requirements and your budget to find a policy for you. 


We are an independent and impartial price comparison website.


Our services are 100% free to use.

check is supported by its users. When you make a purchase through links on our site, we may earn an affiliate commission.

Michael Quinn

Author: Michael Quinn

Michael is a dedicated author helping usave to write guides, blogs and news for the last four years. When not writing articles, you can usually find him at wine tasting events or having a political debate on the night tube.

Read on our blog

With the government poised to implement tough new measures to...

TalkTalk Confirms Huge Bills Hikes from Friday
30. 03. 2022 | Lauren Smith

Budget broadband provider TalkTalk has been notifying customers via email...

A year-long investigation by charity Citizens Advice has revealed a...

All English Schools Will Have Gigabit Broadband by 2025
23. 03. 2022 | Lauren Smith

Education Secretary Nadhim Zahawi has announced a new commitment to...